Sustainable, yet hugely profitable Ag investments may be the answer to Global Warming, Illegal Immigration, Drug Cartels and even Al Qaeda.
Being a veteran of the IT industry gives one unique insights into global business as IT is the quintessential melting pot of resources from all over the world, unlike any other.
So after being a full-time permaculture farmer for over a year now, I have embarked on a journey to India. Soon Danny (20), Cole (27) and Cody (28), all of Bel Air will be joining me.
While I am a student of Joel Salatin and Polyface Farm, I am only an amateur farmer. However, I grew up on a Plantation in India being exposed to various operational responsibilities while still in grade school acquiring proficiency in many areas before migrating to the US while in High School.
I am writing this with the hope that someone in the US who has knowledge about sustainable agriculture operations can educate me, how we may replicate locally what we are doing in India.
I know off tremendous international financial incentives to Countries like Costa Rica, in planting trees to combat Global Warming. Since the scope of work in India is similar in nature, if any one knows the intricacies of working with organizations to duplicate such incentives for India, please let me know.
All the numbers that I discuss herewith are averages. There are variations on both extremes when running a Rubber (Hevea brasiliensis) Plantation, a member of the spurge family, Euphorbiaceae. I am very fascinated by Rubber, not only because of the nostalgia, but it is extremely profitable, while sustainable and massively green. Plus you are helping fight Al Qaeda, as natural rubber is a formidable alternative to petroleum based synthetic rubber. Any time, I can get rid of Petroleum, I am all over it.
I am sure, most of my readers will want to know, how much money there is in the business of starting a Rubber Plantation and since many of us do not have millions of dollars to start a new initiative, I am going to be talking about small acreage farming.
With the USD near all time high, ten acres of land in certain parts of India can still be purchased for under $50K. However, land of this nature is fast disappearing and I myself would gobble up all I can, if I could.
Fencing, land prep, planting, drip irrigation, maintenance and the likes will double that amount by the time the Rubber trees reach maturity in 7 years. Now begins the fun part. You can reasonably expect to make an average net profit of $50,000 dollars annually for the next 25 to 30 years, while being an outstanding steward of the environment. I cannot think of a better use of money. Period.
The fun just doesn't end there. In 25 to 30 years, while the Rubber trees are no longer viable for harvest, the wood (timber) alone will be worth your initial investment plus the cost of starting all over again.
OK, so you are wondering, what happens if you don’t want to be farmer for the next 30 years? No problem there either. Locals will gladly pay 3 to 4 times your original investment for an operating plantation. There are many socio economic reasons for this, but that needs to be saved for another blog.
While the land is becoming scarce by the day, value nearly doubles every two to three years with no end in sight. We are not talking about a real estate bubble either. That’s because, with nearly a billion and a quarter people and a growing percentage of them all over the world, like me, the consumer economy of India is diversified like no other. The social support system and an increasingly spreading out nucleus families, ensures that the trend will continue for perhaps another 100 years or more.
Brings me back to my original thought… Are there areas of the United States that’s suitable for Rubber? I am nearly certain countries like Mexico, Costa Rica and Brazil is well suited for Rubber. So how come wealthy investors don’t consider sustainable investments of this nature in those countries? Perhaps, massive US investments in Sustainable Agriculture is the way to fight the Illegal Immigration and Drug Cartels, not guns and artificial walls.
A growing local economy in countries like Mexico will prevent illegal immigration to the US. I spend quite a bit of my time with a large number of 20 somethings here at StartupVillage.in and not a single one looks forward to leaving India or has the time for listening to religious fanatics. Thats proof enough people don't look forward to being an illegal immigrant, when they have opportunities at home. Perhaps all the money we waste on the "Speak English" signs that litter the area can make a significant difference to Global Warming, Illegal Immigration, Drug Trade and even Terrorism.
Sustainable Ag: Some numbers you need to know about Rubber Plantations.
In the previous article I talked about the cost of land. Obviously land cost varies and farm land suitable for Rubber is not readily available everywhere. Further the cost of labor may or may not make it a practical proposition in many countries. Most of my own experience is limited to India, when it comes to natural rubber.
The first and foremost obstacle I hear to Rubber Plantation is the gestation period of nearly 7 years. The farmer will have to invest his nearly non-existent capital with no new revenue coming for 7 years. Your average farmer cannot afford this.
The other argument is, the competing opportunities available for investors with sufficient capital. I have been talking to others in corporate India who consistently look for 45% annual return on their capital. Now, as a passive investor you will be hard pressed to create that type of return, but it’s quite possible for individuals very active in managing their own business portfolios. So the power of compounding at 45% is a formidable barrier to entry into sustainable Ag with its very long gestation period.
Sustainable Ag Rubber Plantations require great deal of patience as it takes nearly 7 years to create cash flow from operations. However, professional management of plantation operations can routinely create cash flow from the very first year using complementary intercrops during the first few years, but that will require additional investments beyond the scope of this article.
One acre of land in the ideal world is about 209 x 209 Square Feet. Spacing seedlings about 10 feet apart and each rows about 20 feet apart is an acceptable practice in Rubber planting resulting in approximately 218 trees in an Acre.
Various clones of Rubber exist with varying level of productivity based on various environmental qualities. Even many Rubber farmers do not understand this phenomenon. For instance, when I was a youngster the most modern clone was the RRII-105 which in ideal conditions yielded less than 1500 Kg/Hectare. Well, everyone who planted one hoped for ideal production, but that just cannot be. Then the price dropped and they cut down the trees to move on to the next opportunity.
Professional farmers understand that modern clones such as the USM-1 can yield nearly double the rate of RRII-105 in average conditions and rubber market price closely follow Crude Oil. Synthetic rubber is a byproduct of petroleum and the reason why Rubber follow Crude pricing. Further, knowledgeable farmers know things like a curved stem on a modern clone is a feature and not a defect of the plant. In the past, they would cull such seedlings.
Crude Oil is a commodity with limited supply and therefore, the future of natural Rubber is to my understanding better than being an Oil Barron. So if you missed out on the Dakota oil boom, you can create your own fortune in natural rubber and compete successfully with Oil. If you don’t believe that money grows on trees, you haven’t learned about Rubber Plantations.
Many would be farmers look for the cheapest land to plant Rubber, and then complain about the yield. Like any business, you get from Rubber what you put into it.
A $100K investment in small scale sustainable Ag of Rubber Plantations with yields like mentioned in USM-1 clone can well exceed $50K annually after the plant maturity period of 7 years or so. In addition, the underlying real estate asset doubles in value every 2 to 3 years while producing farms are priced at 3 to 4 times as much. I am not even using inflation adjusted numbers and I believe you will be hard pressed to find a better investment than Sustainable Ag.
Bottom line is, if you care about the environment and want to do something about issues such as Global Warming or making sure your kids have clean air to breathe, then you owe it to yourself to understand opportunities that exist in sustainable Ag. Consider Ag, the next time pollutionary investment opportunities comes calling.